Mortgage Calculators and Junk Fees

Mortgage calculators can provide a variety of resources other than what the initial intention maybe.  Using a mortgage calculator to evaluate junk fees is one such resource.  Lender junk fees are generally defined as all upfront charges made by a lender with the exception of points and necessary charges to secure the loan.  Based on this definition, it is assumed that an appraisal is necessary to get a loan and therefore is a proper or maybe a legitimate cost and not a junk fee.  The same would be said for a credit report, title charges and points.  Clearly, not all upfront lender charges are junk fees.  

Mortgage points are generally defined as fees the borrower pays the lender at the closing, which is expressed as a percent of the loan.  A point equals one percent of the loan amount.  A point is an upfront fee that reduces your monthly interest rate and total interest due over the life of a loan since it is reducing the interest rate.  However, if a potential borrower takes a quick look at the mortgage rate available, there is a wide range of interest rates and points priced for similar loans.  One would have to wonder why there would be similar loan products with identical rates and different points charged.  Surely, all points are not simply reducing the interest rate but are merely charges of the mortgage company.  Contrary to generally accepted mortgage information, all points are not created equal and are often simply disguised excess fees generated by the mortgage lender.

Mortgage interest rates and points are disclosed fairly readily on the internet, in newspapers and in various advertising media.  However, the mortgage interest rate and points can be meaningless without knowing all of the costs for the loan.  A $200,000.00 mortgage loan with a 5.75% interest rate, no closing costs and 3 points is almost certainly not a better loan than a loan with the same loan amount, an interest rate of 5.75% with no pints and a $2,000.00 processing fee.  Banks and lenders can manipulate the fees, interest rates and points to obfuscate the true costs of the mortgage loan.

Borrowers should be concerned with the total charges, points, fees, closing costs, junk fees and any other costs and charges the mortgage industry should choose to create.   Unfortunately there is an issue that information about junk fees along with total costs is obscured as much as possible.  The value of mortgage calculators is to calculate the impact over any amount of time, the impact of fees and points and junk charges have on the payment and APR of a home loan.  In addition, the use of these mortgage calculators can often force the consumer into making sure they have the relevant information from the mortgage companies to input the data into the mortgage calculator, 

When a consumer is shopping for a mortgage that should be sure to ask the lender for that total costs in writing and then use this data in the mortgage calculator to determine the loan best suited for their requirements.

The APR mortgage calculator is great starting point as is a mortgage calculator that compares closing costs or even a comprehensive mortgage calculator.  The better the data input into a mortgage calculator, the better the output.

This entry was posted on Friday, December 12th, 2008 at 9:19 pm and is filed under Mortgage Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.